iesy Repository GmbH - Irish Stock Exchange

ate risk and changes in fair market value should not have a significant effect on the fixed rate debt until iesy would be
required to refinance such debt. On a pro forma basis reflecting the Refinancing, the ish Acquisition and the Financing as of
December 31, 2004, iesy had outstanding fixed rate debt and other obligations of €575.0 million, and outstanding floating
rate debt of €1,050.0 million.
Impact of Inflation
A portion of iesy’s costs are affected by inflation. iesy attempts to restrict increases in its costs below the rate of
inflation through productivity improvements and capital expenditures. However, general inflation affects costs for iesy and
its competitors.
Critical Accounting Policies
The preparation of iesy’s financial statements requires management to apply accounting methods and policies that are
based on difficult or subjective judgments, estimates based on past experience and assumptions determined to be reasonable
and realistic based on the related circumstances. The application of these estimates and assumptions affects the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and the
reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates given
the uncertainty surrounding the assumptions and conditions upon which the estimates are based.
iesy has summarized below its accounting policies that require the more subjective judgment of its management in
making assumptions or estimates regarding the effects of matters that are inherently uncertain and for which changes in
conditions may significantly affect its results of operations and financial condition. For more, see the notes to iesy’s financial
statements included elsewhere in this Prospectus.
The critical accounting policies described below refer to iesy’s audited consolidated financial statements. The
procedures used in preparing iesy’s audited consolidated financial statements were not the same as those that would have
been used to prepare audited financial statements for the iesy Predecessor.
Accounting for Acquisitions and Corporate Reorganizations
The acquisitions of New iesy shares pursuant to the iesy Acquisition have taken place on January 14 and July 23, 2003.
Furthermore, the capital has been increased effective May 16, 2003 by minority shareholders of New iesy. In November
2004, the remaining minority shares of New iesy were contributed to iesy at fair value. To derive the fair market value of the
interests contributed to the Issuer in 2004, iesy had to perform a valuation of the business. This necessarily involved an
element of judgment on our part. The book value method is used for the capital consolidation by setting off the acquisition
costs for shares in the subsidiaries at the time of acquisition against the equity portion related to these companies. As much as
their current value differs from their book value the emerging difference increases assets and liabilities. Remaining active
differences have been disclosed as goodwill and are amortized using the straight-line method over the anticipated useful life
of 15 years.
From time to time, we may undergo corporate restructurings.
Intangible Assets
Intangible assets acquired are valued at acquisition costs, reduced by ordinary amortization. The company applies
straight-line depreciation based on the anticipated useful life of intangible assets. The useful life of certain assets is as
follows: (i) software is 2 to 4 years, (ii) customer base is 10 years with respect to the indirect customer base and customer
base of former DeTeKS and 20 years for the direct customer base and (iii) goodwill is 15 years.
Tangible Assets
Tangible assets are valued at original cost, reduced by ordinary depreciation at the amount permissible under German
tax law. The company applies straight line depreciation based on the anticipated useful life of tangible assets. The anticipated
useful life of technical plant and machinery is 10 to 15 years, that of the cable network 15 years and that for other plant,
furniture and office equipment is 3 to 10 years.
Allowance for Doubtful Accounts
Each month iesy classifies doubtful receivable balances. These receivables consist primarily of a large number of small
items, the allowances of which are calculated on an ageing list. Receivables for larger customers or items are examined
individually, and a valuation adjustment is calculated for each such receivable. If circumstances change (for example, if the
risk of default is higher or lower than expected), iesy’s estimates of the recoverability of amounts due to iesy could be
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